H.R. 7187 — Clarity for Compensation Act

This section establishes an exception to the definition of "broker" under the Securities Exchange Act of 1934 for a personal services entity (PSE)—an entity established by a registered representative of a broker to receive compensation for the representative's services and for administrative purposes—if the PSE meets specified requirements. Those requirements are that (1) the broker instructs or approves the payment amount and timing to the PSE (at the representative's direction) and maintains related records; (2) the PSE does not hold itself out as a broker or engage in any other broker or dealer activities; (3) the broker maintains adequate supervision and control over the representative; (4) the broker and PSE have a written agreement governing their relationship and compensation responsibilities; (5) the PSE is owned solely by the representative, the representative's immediate family members (i.e., spouse, child, parent, sibling, grandparent, grandchild, stepparent, stepchild, stepbrother, or stepsister), or entities wholly owned by them; and (6) the PSE meets any other requirements prescribed by SEC rule. (Thus, the PSE must maintain and make available to the SEC and applicable self-regulatory organization all books and records required of the broker and necessary to verify ongoing compliance.) The provision takes effect 180 days after enactment.